How digitization is moving agriculture
JEANETT CLARK: Digitization and technological disruption have accelerated over the past two years, necessitated by the pandemic and the need for companies to find new ways of doing business. Among the many new avenues found in the agricultural sector was agricultural e-commerce — or trading online in agricultural commodities, fresh produce, and even livestock.
Join me today as John Hudson, National Head, Agriculture at Nedbank, and Olebogeng Mogale, Executive, Digital Fast Lane at Nedbank, as we talk about the sector and whether agriculture has always been a good adopter of new technologies.
John, can you please tell us from a broader perspective what technological innovation and digitization mean for agriculture?
John Hudson: Thank you Jeannette In all honesty, agriculture is no different from many other sectors. I think it plays a crucial role and as you said we have seen [its] Intake is only increasing as the pandemic progresses. But to be honest, I think farmers have been really good adopters of technology and also digital solutions, and that was really caused by the margin squeeze. Farmers were under pressure, margins were constantly squeezed. I think one of the ways that farmers have stayed in the game is by embracing technology, so in that sense it’s really, really important.
I feel like something has happened recently – the pandemic was probably a spark for that – that farmers are looking at this with a sharper eye because we are seeing examples of where this is now a ‘must’. , really, just to make their lives easier, to save time, to be more efficient in their businesses. I think technology and digital are really important.
In addition, we also see that the consumer is putting pressure on farmers, if you want to call it that, and we see that many of the changes are being driven by consumers. So it’s a combination of things. It’s what farmers want to do better in their own business and do more with less – and that means being competitive and so on. But consumers are equally demanding much better service and much better products, if you want to call it that.
JEANETT CLARK: So how much do you think the adoption of change and the adjustment of practices [is] consumer driven?
John Hudson: That’s really interesting, but I certainly feel like the consumer is pushing this more and more. What I mean by that is that consumers are definitely looking for nutritious foods; They want nutritious food for their families. They also want safe food. They also want to start understanding the history behind how the food is made. Of course, sustainability is also becoming a big factor, so the sustainability credentials of farmers and their products are under scrutiny. So what we’re seeing is that consumers are driving this, and quite frankly, farmers are having to adapt.
In many cases I think they see this as an excellent opportunity. Whether it’s blockchain technology, some of the e-trading platforms, or being able to engage with their consumers in a much more efficient way, I think a lot of farmers see the value in that. So they don’t really feel pressured in that regard, but they saw an opportunity to turn this around and tell a great story to their customer base.
I think a good example of this is Nedbank Avo. You know, Nedbank Avo is really there to connect business to business and business to customers. I think this platform has tremendous opportunity in the agricultural space and is actually already doing a good job of connecting wine growers to either businesses or the end consumer. I think that’s a start and a really good example. But frankly, there are many others.
JEANETT CLARK: Ole, I’m very curious to hear your thoughts on some of the digital trends relevant to the agricultural sector. can you expand something
OLEBOGENG-MOGALE: Absolutely, absolutely. What we find is that the trends tend to really follow the market needs, the market challenges and the market opportunities. There’s a lot of technology in the industry, especially when it comes to how you can do business better and smarter. So there is the introduction of drone technologies, [the] internet of things and so on. They have concepts like connected cars and so on.
But I think there’s also a growing trend: the whole platform economy space, right, that directly addresses issues of supply and demand that John just touched on. Most of these trends really relate to two things. One is access – access to the market.
I think it’s also a lot about supply chain integrity and sustainability issues.
But certainly on the side of the platform economy, we are seeing the emergence of many e-commerce marketplaces – both local and international – focused on the agricultural sector.
Then, on the supply chain integrity front, we see the adoption of things like RFID [radio-frequency identification] and blockchain as mechanisms to empower the consumer with knowledge and security. But because they help with traceability or provenance of goods, they also help a lot and the use cases are only going to increase. They will help a lot when there are outbreaks and things like that.
We believe that blockchain in particular will definitely change the face of the sector due to its many use cases. We are seeing it being adopted in smart contracting, which is really, really great because it facilitates easy data sharing between players in the industry, creates more visibility for market participants, and so I think creates the overall efficiency of the system. Those are some of the trends we’ve seen.
JEANETT CLARK: Let’s just take a step back. You mentioned the platform economy – how do you see the application or the spread in the industry?
OLEBOGENG-MOGALE: It’s growing a lot. I think you mentioned earlier or asked a question whether the sector is a big adopter of technology and there is evidence of it.
So if you look at marketplace platforms or platform companies like DigiFarm in Kenya, it already has over 2.5 million farmers subscribed. For me, there is no major evidence for the question of the willingness of the industry to use technology. What it does is [it] gives farmers access to market opportunities but, more importantly or equally importantly, access to financial services and credit solutions. If you look near South Africa and Zambia you have a platform like Mano [Products]which brought the participating farmers an average growth of more than 7% in the first pilot year.
So it’s definitely a game to provide access to the market and to help the farmers not only with their farming activities but also with information about market sectors which then drives that supply and platforms like CropData in India that really do that a lot do well. Locally there are many new up and coming players in this space, whether you are thinking of Khula!, Nile or HelloChoices. The list is really, really too long.
But there is certainly an increase in digital marketplaces aimed at helping farmers, cooperatives and the like in particular to access the market.
JEANETT CLARK: It’s interesting when you talk about the way to market. Does this mean that digital technologies will make it easier for farmers to [who] get more control over this process, the way to the market?
OLEBOGENG-MOGALE: Sure, sure. This helps them gain control over how you actually bring your products or produce to market. So for us, that’s the number one priority. Second, it also really shortens the distance, if you will, between the grower and the retailer or processor, and ultimately the end user – creating efficiencies in the system. These [players] can be up to 7.5% or more depending on the type of value chain.
And on John’s earlier point about the margin squeeze, the sector, particularly farmers, always feels that this is really starting to open up these profitability opportunities as such. So that is a key role or a key role that the digital marketplaces will definitely positively have in the industry. That doesn’t necessarily mean there will be a complete disruption or overhaul of value chains as we know them, but the farmer does exist [and] the cooperatives alternative distribution models, more flexibility and the closeness that I spoke of between them and the final consumers. So those are the trends, yes.
JEANETT CLARK: In your opinion, what must the industry and especially the farmers do to take advantage of the opportunities offered by digitization?
OLEBOGENG-MOGALE: First, I think in relation to, let’s call them, digital marketplaces, they’re looking at these opportunities not only from their route-to-market perspective, but also from the perspective of capitalizing on the sourcing opportunities that these platforms offer. We see more and more sellers of input material, equipment and the like not only embracing e-commerce themselves, their own e-commerce strategies, but also participating in open and digital marketplaces. This means that a farmer then also has the opportunity to easily and conveniently find the best price for these primary products and the best possible offer at the right time. So that’s one part.
I think the second part in terms of opportunities to take advantage of is that the emergence of digital marketplaces is really making working capital solutions easier to access. So with more and more APIs [application programming interfaces] evolving in both the credit and payment markets, getting items on credit is becoming more and more a matter of a few clicks. This means that in addition to the sales and automation benefits they receive, their own customers also benefit from what we like to call “buy now, pay later” benefits, with farmers actually getting their money faster or instantly. This is of course a win-win situation for both the farmer and the seller.
I think the last point I want to make about the possibilities is to say that there aren’t many tools on the market that really help farmers to achieve better practices from a data management point of view as they are state of the art Things like that are known to your plants, your processes are affected and so on. I think these will increasingly become key factors for lenders when making lending decisions. So farmers need to use more and more of these tools.
JEANETT CLARK: We definitely see an interesting future ahead considering the new players in the platform economy, e-commerce strategies for agriculture and further digital disruption. I can’t wait to see what’s next.
It was John Hudson, National Head, Agriculture at Nedbank, and Olebogeng Mogale, Executive, Digital Fast Lane at Nedbank, discussing the sector and what digitization is doing there.
Presented by Nedbank Agri.
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